July 31, 2009

KBR Sued by Subcontractor

Global engineering and construction firm KBR is being sued by a former subcontractor, which claims it is still owed payment for work it did four years ago in Iraq.

Iraqi American Development Corp., a subsidiary of Nevada-based Iraqi American Media, filed its $14 million suit Tuesday at the U.S. District Court for the District of Columbia. According to the complaint, KBR, then a Halliburton subsidiary, hired the company in 2004 to rewire Iraq’s Presidential Palace.

The subcontractor brought in more than 125 workers for the project, which was scheduled to finish in 2004. But according to the complaint, problems began almost immediately. Because of KBR’s “pending financial situation” (it was placed under Chapter 11 bankruptcy protection in 2003, and didn’t emerge until 2005), it was unable to obtain a necessary letter of credit to pay for equipment and materials, leaving the subcontractor to cover the costs. The complaint also alleges that KBR failed to make work areas available or to provide adequate security, and missed monthly payments. The resulting delays set the project’s end date back to November 2005.

At that point, the complaint states that KBR let the contract expire, confiscated the subcontractor’s equipment, computers and records used in the project and finished a minimal amount of work itself.

The complaint states that in 2007 KBR agreed to pay the full $14 million owed on the original contract. It has yet to make the full payment, the complaint says, and has not compensated the subcontractor for its extra costs.

Neither KBR nor the subcontractor’s attorney, Sheppard Mullin Richter & Hampton partner John Fornaciari, returned calls for comment. No lawyers have entered an appearance for KBR.

KBR has had its fair share of legal travails over recent years. In February, the company pleaded guilty to bribing Nigeran officials. It has been sued by female employees claming sexual abuse, families former workers who say they were illegally trafficked to Iraq, and soldiers who say it served them spoiled food.

UPDATE: August 5

A KBR spokesman said the company has not been served with the complaint and therefore cannot comment on the details of the suit.